August 14, 2015 FPI | Food Prices and Exchange Rate
14 August 2015

Exchange rate fluctuations are one of the most popular topics for debate in today’s Georgia. Given that Georgia’s self-sufficiency ratio in food products is quite limited (34%), Lari depreciation might be particularly hurtful for Georgian consumers, who spend a considerable amount of their income on food.

According to the latest data on Retail FPI, food prices increased by almost 1% compared to the previous week. This increase terminated the downward trend in food prices observed from the middle of summer.

One of the possible reasons for this increase might be the depreciation of Lari observed in the middle of July and becoming more obvious during the last two weeks. It is quite surprising to see that in spite of all events happening in summer in Georgia Lari is still losing its value. Such big events like the European Youth Olympic Festival in Tbilisi and the UEFA Super Cup game along with the summer flow of tourists did not strengthen Georgian Lari, which continues to depreciate and hit the mark of 2.32 GEL/USD according to the official statistics (NBG, 14.08.2015).

An increase of Retail FPI by 1% might not be alerting but if the currency continues to depreciate this might result in further food price increases.